law in pakistan

7/30/2019 Law in Pakistan

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IN THE SUPREME COURT OF PAKISTAN[Original Jurisdiction]PRESENT:MR. JUSTICE IFTIKHAR MUHAMMAD CHAUDHRY, CJMR. JUSTICE KHILJI ARIF HUSSAIN

HUMAN RIGHTS CASE NO.7734-G/2009 & 1003-G/2010[Alleged Corruption in Rental Power Plants]HUMAN RIGHTS CASE NO. 56712/2010

[Fraud in payment of Rental Power Plantsdetected by NEPRA]Applicants in person: Makhdoom Syed Faisal Saleh Hayat,Federal Minister for Housing and WorksKhawaja Muhammad Asif, MNA assisted byM/s Mustafa Ramday and Syed Ali ShahGilani, AdvocatesAmicus Curiae: Mr. M. Anwar Kamal, Sr. ASCOn Court Notice:For NEPRA: Syed Najmul Hassan Kazmi, Sr. ASCMr. M. S. Khattak, AORSyed Safeer Hussain, RegistrarSyed Insaf Ahmad, DGFor PEPCO/GENCOs/ Kh. Ahmed Tariq Rahim, Sr. ASCWAPDA & M/o W & P: Mr. Abbas Mirza, ASCMr. Moazzam Ali Rizvi, ASCSyed Zafar Abbas Naqvi, AORMr. Arshad Ali Ch. AOR assisted by

Mr. Ijaz A. Babar, Finance Director, PEPCOBarrister Asghar Khan, SML, PPIBMr. Hamid Ali Khan, Addl. Secy. M/o W&PMr. Masood Akhtar, GM NPCCMr. Mansoor Ali Khan, CE, WPPORana Muhammad Amjad, GM, WPPORana Asif Saeed, Chief Legal AdvisorMr. Salman Iqbal, Executive Directed (Legal)Mr. Abdul Jabbar Memon, CRRO, WAPDA, KHIMr. Anisuddin Alvi, DD, CRRO

Mr. Razi Abbas, former CFOMr. Abdul Jabbar Shaikh, DM, LPGCLHRC 7734-G/09

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Mr. Faizullah Dahri, FD, LPGCLMr. Muhammad Anwar Brohi, CEO, LPGCLMr. Sultan Muhammad Zafar, CEO, GENCO-IIIFor Raja Pervez Ashraf Mr. Wasim Sajjad, Sr. ASC


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Former Minister W&P: Mr. M. S. Khattak, AOR assisted byMr. Idrees Ashraf, AdvocatesFor Karkey : Mr. Muhammad Akram Sheikh, Sr. ASCMr. Azid Nafees, ASC assisted bySyed Ahmad Hassan Shah, Ms. Natalia

Kamal and Sajeel Shehryar, AdvocatesFor Gulf & Sialkot Syed Ali Zafar, ASCPower: Raja Zafar Khaliq, ASCRaja Abdul Ghafoor, AORFor Techno Sahuwal Raja M. Anwar-ul-Haq, ASC& Techno E Services:For Walters Power: Mr. Shahid Hamid, Sr. ASCMr. M. S. Khattak, AORFor Pakistan Power: Dr. Parvez Hassan, Sr. ASCMr. M. S. Khattak, AORFor Reshma Power Mr. Abdul Hafeez Pirzada, Sr. ASC& Kamoki Energy: Mr. Sikandar Bashir Mohmand, ASCMr. Mehmood A. Sheikh, AOR assisted byM/s Hameed Ahmed and Mustafa AftabSherpao, Advocates.For Young Gen Power: Sh. Zamir Hussain, Sr. ASCFor M/o Finance: Mr. Muhammad Iqbal Awan, Addl. SecyFor FBR Mr. Salman Siddique, Chairman FBRDates of hearing: 26-28 & 31 October, 1-4, 14-17 & 21-24November and 12-14 December, 2011

J U D G M E N TIFTIKHAR MUHAMMAD CHAUDHRY, CJ TheConstitution of the Islamic Republic of Pakistan mandates that Stateshall exercise its powers and authority through chosen representativesof the people. A democratic order in place, through the representativesof people, being the members of Parliament, obligates the electedHRC 7734-G/09

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representatives to fulfill their commitments bestowed upon them underthe Constitution, and in their representative capacity, they are boundto perform their functions honestly, to the best of their ability,

faithfully, in accordance with the Constitution and the law as well asthe Rules of the Assembly, and always in the interest of sovereignty,integrity, solidarity, well being and prosperity of Pakistan. Such abinding force of the Constitution commands them to ensure well beingand prosperity of Pakistan, so whenever they feel threat to the wellbeing of the people of Pakistan for any reason, they are bound topreserve the same.


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2. Makhdoom Syed Faisal Saleh Hayat, one of theParliamentarians of PML(Q) and its parliamentary leader in theNational Assembly, now holding the office of Federal Minister forHousing & Works, through a press statement published in DailyNation dated 8.9.2009, urged this Court to take action in respect of

Rental Power Projects (RPPs) which, according to him, was justanother name of corruption. He said that he had raised the issue ofcorruption in the award of RPPs before every forum, including theNational Assembly of Pakistan, but his voice was not attended to,therefore, he had approached the Supreme Court for initiating suomotu proceedings against all those who were involved in this massivescam of US$ 5 billion, which was being skimmed from the pockets ofinnocent people of this country. Makhdoom Syed Faisal Hayat wasasked to furnish evidence in support of allegations for furtherexamination of the matter. He submitted a detailed application dated26.9.2009, wherein reiterating the allegations of corruption, he reliedupon certain documents of the PEPCO, GENCOs, WAPDA and Ministryof Water & Power to prove his assertions. Thereafter, para-wiseHRC 7734-G/09

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comments were called from WAPDA, which were submitted by M.D.PEPCO, denying the allegations/charges of corruption. However, it wasemphasized that due to acute shortage of electric power in thecountry, short term measures in the shape of RPPs for three to fiveyears were adopted pursuant to Rental Power Policy approved byEconomic Coordination Committee (ECC) of the Cabinet, Government

of Pakistan from time to time, inter alia, vide case No.ECC 135/9/2006dated 16.8.2006. Similarly, the other stakeholders denied theallegations of corruption.3. When the petition was pending for hearing, anothereminent Member of the National Assembly, namely, KhawajaMuhammad Asif belonging to PML(N), vide CMA No.3100/2010, joinedthe proceedings w.e.f. 21.10.2010.LAW RELATING TO GENERATION AND TRANSMISSION OFELECTRICITY4. In 1994, the Private Power and Infrastructure Board (PPIB)was created as One Window Facilitator, inter alia, with a view to

promote private sector participation in the power sector of Pakistanand to facilitate investors in establishing private power projects andrelated infrastructure, execute implementation agreements withproject sponsors and issue sovereign guarantees on behalf ofGovernment of Pakistan. On 16.12.1997, to provide for the regulationof generation, transmission and distribution of electric power andmatters connected therewith and incidental thereto, the Regulation of


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Generation, Transmission and Distribution of Power Act, 1997(hereinafter referred to as the the Act, 1997) was promulgated.Subsections (vi), (xi) and (xxvi) of section 2 of the Act, 1997,respectively, define Distribution, Generation and TransmissionCompanies. In 1998, Pakistan Electric Power Company (PEPCO) was

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incorporated under the Companies Ordinance, 1984 with a view toimprove the efficiency of the power sector, to meet customers electricenergy requirements on a sustainable and environmental friendlybasis, to stop load shedding, to construct new grid stations, to reduceline losses, to minimize tripping and theft control, to revampgeneration units and to improve customer services, and develop anintegrated automated power planning system for generation,transmission and distribution to ensure system stability, fault isolationand upgrade relying, metering and tripping system at the level of

National Transmission and Distribution Company (NTDC) as well asDistribution Companies (DISCOs).5. It may be stated that in Pakistan, electricity is producedfrom hydel, oil, gas, coal and nuclear sources. Hydel and thermalpower generation was previously under the control of WAPDA. Toaugment the generation capacity to meet demand and eliminateinefficiencies due to WAPDAs growth, demand suppression and hightariff policy and proliferated theft, WAPDA's Power Wing wasrestructured/segregated into twelve (12) distinct autonomous entitiesunder the Companies Ordinance 1984, viz., three generation, one

transmission and eight distribution corporate entities. Thus, electricitygeneration from thermal sources is under the control of GenerationCompanies (GENCOs) carved out of WAPDA, which are exclusivelyowned by the Government of Pakistan. These companies have longterm projects called IPPs, spreading over a period of 25 to 30 years.The electric power generated by GENCOs is delivered to NTDC, whichin turn, delivers the same to DISCOs. The DISCOs then sell it to theconsumers under the contracts of electric powers on specified terms.HRC 7734-G/09

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6. It is to be noted that the most significant aspect of the

generation, transmission and distribution of the electricity is thedetermination of tariff, which is done by a Regulatory Authority inaccordance with the provisions of the Act, 1997 and the Rules madethereunder, as well as the Policy Guidelines issued by the Governmentof Pakistan under section 31 of the Act, 1997 from time to time.Importantly, the Policy should not be inconsistent with the Act, 1997.Therefore, WAPDA, in principle, has no power to interfere with theaffairs of RPPs.


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7. Under section 3 of the Act, 1997, National Electric PowerRegulatory Authority (NEPRA) consisting of a Chairman and fourmembers, one from each province, to be appointed by the FederalGovernment, was established. Section 7 of the Act, 1997 prescribespowers and functions of the Authority as under: -

Powers and functions of the Authority: (1) The Authorityshall be exclusively responsible for regulating the provisionof electric power services.(2) In particular and without prejudice to the generalityof the foregoing power, only the Authority, but subject tothe provision of sub-section (4), shall,(a) grant licences for generation, transmission anddistribution of electric power;(b) prescribe procedures and standards for investmentprogrammes by generation, transmission anddistribution companies;(c) prescribe and enforce performance standards forgeneration, transmission and distribution companies;(d) establish a uniform system of accounts bygeneration, transmission and distribution companies;(e) prescribe fees including fees for grant of licences andrenewal thereof;(f) prescribe fines for contravention of the provisions ofthis Act; and(g) perform any other function which is incidental orconsequential to any of the aforesaid functions.

(3) Notwithstanding the provisions of sub-section (2)and without prejudice to the generality of the powerconferred by sub-Section (1) the Authority shall,(a) determine tariff, rates, charges and other terms andconditions for supply of electric power services bythe generation, transmission and distributionHRC 7734-G/09

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companies and recommend to the FederalGovernment for notification;(b) review organizational affairs of generation,

transmission and distribution companies to avoid anyadverse effect on the operation of electric powerservices and for continuous and efficient supply ofsuch services;(c) encourage uniform industry standards and code ofconduct for generation, transmission and distributioncompanies;


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(d) tender advice to public sector projects;(e) submit report to the Federal Government in respectof activities of generation, transmission anddistribution companies; and(f) perform any other function which is incidental or

consequential to any of the aforesaid functions.(4) Notwithstanding anything contained in this Act, theGovernment of a Province may construct power housesand grid stations and lay transmission lines for use withinthe Province and determine the tariff for distribution ofelectricity within the Province.(5) Before approving the tariff for the supply of electricpower by generation companies using hydro-electricplants, the Authority shall consider the recommendationsof the Government of the Province in which suchgeneration facility is located.(6) In performing its functions under this Act, theAuthority shall, as far as practicable, protect the interestsof consumers and companies providing electric powerservices in accordance with guidelines, not inconsistentwith the provisions of this Act, laid down by the FederalGovernment.In terms of sections 15, 16 and 20 of the Act, 1997, licenses forGeneration, Transmission and National Grid are also to begranted by the NEPRA. Under section 7 of the Act, 1997, NEPRA hasbeen empowered, inter alia, to establish uniform system of accounts in

respect of generation, transmission and distribution companies and todetermine tariff through competitive process in terms of the Guidelinesfor Determination of Tariff for IPPs issued by the Ministry of Water andPower in the month of November, 2005.INSTALLED CAPACITY TO GENERATE ELECTRICITY BEFOREINTRODUCING RPP8. Makhdoom Syed Faisal Saleh Hayat pointed out that as perbrochure on Solicitation For Fast Track IPP and Rental Power ProjectsHRC 7734-G/09

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through International Competitive Bidding issued in pursuance of the

decision taken in the Special Cabinet meeting in case No.59/08/2008dated 14.05.2008, presently the total installed electricity generationcapability in the country was shown about 19478 MW, whereas as perPEPCO supply and demand position for the year 2009 it is 12074 MWand 17102 MW respectively in the months of March and September2009 out of total generation against the peak demand of 14686 and18110 MW as it has been shown in the chart presented by him along


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with his petition. The stand taken by the petitioner has beencontroverted by Khawaja Ahmad Tariq Rahim, learned counsel for therespondents as according to him the projected demand of electricityfor the period 2010-2013 ranges between 19352 MW to 24126 MW. Tosubstantiate his plea, he has also relied upon the ADB report.

9. It is important to note that the learned counsel for therespondents has not disputed the contents of chart showing electricitygeneration position as prepared in the year 2009. Similarly, the figuresquoted from ADB report about the higher demand on the growthproduction would be 8% in 2009 to 7.5% in the year 2013. The figuresfrom the ADB report are as follows: -2010 218382011 234762012 251852013 26978As far as above noted figures are concerned, there is no need tocomment on the same because the contents of up to date generationposition have been prepared by PEPCO for the year of 2008-2009 andonward whereas the projection of the increased demand by the ADB,which is also not disputed relates to the year 2010 and onward. Whatis important is that after having launched RPPs when there wereobjections from all and sundry about the corruption in the matter,HRC 7734-G/09

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which were being adhered to, the Government of Pakistan in themonth of September, 2009 decided for the Rental Power Review by

means of the process of 3rd Party Audit and the assignment wasentrusted to ADB. It goes to establish that in the Special Cabinetmeeting held on 14.05.2008, a decision based on the presentation ofdifferent Secretaries was taken. Summary of the meeting available onthis file does not show that the then Secretary, Water & Power, whowas primarily responsible under the Rules of Business, 1973 had putup the case after doing proper homework. Thus, initially there was aneed of thorough probe into the RPPs by soliciting opinion of theexperts on the subject and also having taken into consideration thebenefit of the past experience relating to the year 2006 when theRental Power Projects were initiated by the then Government at the

locations known as Bhikki and Sharaqpur. Primarily, both theseprojects could not prove a success.10. The Government/Executive being the custodian of thenational resources on behalf of the nation is bound to preserve andprotect the same by strictly adhering to the relevant laws,conventions, experiences and have no authority to compromise withthe resources, which fall within the definition of property in terms of


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constitutional provisions, belonging to general masses falling withinthe ambit of Article 24 of the Constitution.11. Makhdoom Syed Faisal Saleh Hayat, with the assistance ofthe charts which he had appended with his petition, persuaded us tobelieve that without Rental Power Plants to generate additional

electricity, the existing generation capacity was sufficient to cater forthe current requirements, but without properly exploiting its existingresources with a mala fide intention, process of RPPs wereHRC 7734-G/09

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commenced. He referred to the energy policy issued in the year 2002and stated that in the years 2004 to 2007, Letters of Intent (LOIs)have been issued in respect of 34 out of 48 different projects forgenerating electricity i.e. Hydel-13, Oil-5, Gas/Dual Fuel-10 and Coal-6approximate capacity of each type of project being 2962, 1100, 1864,3550 (total 9476 MW); and again in the years 2005 to 2007, LOIs

were issued for Oil-7, Gas/Dual Fuel-7 with expected capacity toproduce 1231, 1359 (total 2590 MW). In this way, capacity was to beincreased by 12066 MW (9476+2590).12. Learned counsel for the respondents, however, insistedthat on account of projected increase in the demand, the existingcapacity was not considered sufficient, therefore, to meet urgentdemand Rental Power Projects were considered to be the solution toreduce day-to-day load-shedding. The argument so made by himmight be very convincing, but due to non-denial of the quoted factsand figures relating to different projects and capability of generating

more electricity, it cannot be denied that PEPCO has sufficientcapability to increase its generation of electricity to meet therequirements. Admittedly, the figures shown on the PEPCO website,reference of which has been made during hearing of the case, wereagainst the stand taken by learned counsel for the respondents.Perhaps the Authority finding no answer to the query raised by theCourt from time to time about the generating capability of electricitystopped up-loading the figures of generation of electricity fromdifferent sources i.e. Hydel, GENCOs, IPPs, etc. and for such reason on06.10.2010 following order was passed by making the direction to theIT In-charge of the PEPCO: -

Petitioner Makhdoom Syed Faisal Saleh Hayat, duringarguments has pointed out that in the petition/letter sentHRC 7734-G/09

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to this Court he has quoted important figures downloadedfrom official website of PEPCO in the year 2009 but lateron such figures have been removed from the website ofPEPCO. This statement so made by him seems to be true


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as per our own I.T. system which has been confirmed inCourt by a responsible officer. Prima facie we are of theopinion that the PEPCO for the reasons known to itsauthority has removed these figures but retrieving of thesame is important for the just decision of the case,

therefore, we direct to the I.T. In-charge of the PEPCO toappear in person in Court and place on record authenticdocuments in respect of the entries mentioned in theapplication copy of which is available with the learnedcounsel for PEPCO and if readily is not available then heshould retrieve the same from the master server.Subsequent thereto the case remained pending but the figures werenot retrieved from the main server as per the report, which we haveobtained from the IT Department of this Court. The report of DataProcessing Manager is reproduced hereinbelow:-It is submitted that information regarding Power Generation &

Generation contribution i.e. Hydel, PEPCO, Thermal, IPPS &

Rental is 19.05.2011 no such information is available.There is no detail regarding the generation of electricity byPEPCO so far.

At the same time, in view of the non-availability of the informationregarding generation of electricity by PEPCO on its website(www.pepco.gov.pk), on 16.3.2012 the Registrar was directed toprocure the following information: -(i) Total generation capacity (Hydel, IPP, RPP, etc.);(ii) Total electricity generated for the last one year (Hydel,

IPP, RRP, etc.), if shortage, assigned reasons;(iii) Detail of IPPs, which are generating and not generatingelectricity and the reasons for the same;(iv) Monthly/weekly average of production of each RPP;(v) Net demand of electricity for each month during the lastone year; and(vi) As to why PEPCO website is not being updated?In response to above query, following details about the total installedgeneration capacity and dependable capacity have been received:-HRC 7734-G/09

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1 2DEPENDABLE CAPACITYMONTH (MW)Total GenerationCapacity/InstalledCapacity(MW) HYDEL IPP'S GENCO'S RENTAL TOTAL

SCP


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Requirement# (i)(i)Mar-11 20686 3850 8305 3580 323 16058

Apr-11 21021 4068 8295 3580 594 16537May-11 21030 5519 8297 3580 594 17990

Jun-11 21030 5142 8300 3580 594 17616Jul-11 21030 5649 8300 3580 594 18123

Aug-11 21030 6437 8300 3580 594 18911Sep-11 21030 6673 8300 3580 594 19147Oct-11 21030 6437 8300 3580 594 18911Nov-11 21030 4240 8300 3580 594 16714Dec-11 21030 4926 8300 3580 594 17400Jan-12 21030 4255 8300 3580 594 16729Feb-12 21030 5030 8300 3580 594 17504

Similarly, the detail of total electricity generated, viz., the net demandand shortfall/load management was provided as under:-3 4 5Total Electric ity Generated (MW)

SCP Requirement # (ii)NetDemandofElectricity/ PeakSystemDemand(MW)Shortfall/LoadManagementMONTH (MW)

HYDEL IPP'SGENCO'SMonthly

Av.Production ofRPPsTOTALHRC 7734-G/09

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SCPRequirement #(i)(iv)(v)Mar-11 3454 4741 1789 61 10045 14981 4936

Apr-11 4216 5923 1377 88 11604 15796 4192May-11 5228 6931 1462 103 13724 17302 3578Jun-11 5145 6790 2000 112 14047 18511 4464Jul-11 5224 5636 1793 143 12796 18860 6063


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Aug-11 5657 6632 1859 67 14215 18677 4462Sep-11 5995 5197 1256 119 12567 18544 5977Oct-11 4359 4109 1268 153 9889 17554 7665Nov-11 3993 6647 1547 215 12402 14156 1754Dec-11 3784 3760 1701 135 9380 14475 5095Jan-12 2472 5498 1708 134 9812 13685 3873Feb-12 4923 4830 1587 83 11423 14691 3268

Detail of power generated by IPPs under 1994 Power Policy during theperiod from March 2010 to February 2012 is given below:-SCP's Requirement # (iii), Detail of IPPs, which are generating notgenerating electricity and the reasons for the same ( P a r t - 1 ) P o w e r Ge n e r a t e d b y I P Ps u n d e r 1 9 9 4 P ow e r P o l i cy

Fo r t h e P e r i o d M a r , 2 0 1 1 t o F e b , 1 2 Sr.No. Plant Name FuelTypeInstalledCapacity(MW)DependableCapacity(MW)Mar-11Apr -11May-11Jun-11Jul-11Aug -11Sep-11Oct-11Nov-11Dec-11Jan-12Feb-12Aver ageTotal1 KAPCORFOGas-HSD1,6381,3427466367518476317464388086965805555346642 HUBCO RFO 1,2921,2008841,0831,032


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1,0648791,1076797897288111,159841 921

3 KEL RFO 131124

108969310587105989160585865854 Lalpir Power(Pvt.) Limited RFO 362350112260152

247248211202284561401891631895 Pak GenPower Limited RFO 36534924860212246286278

246204193178100-1886 SEPCOL RFO 117110.4746244039404250422932

2820367 HabibullahCoastal Gas 140129.156496105765551106


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847169193869

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8 FKPCL Gas 157151.20135126142142144144981061521551541441379 Rousch Gas 450395312316

37035837237837239431138041437836310 Saba RFO 134125.55142715202121

2521028371711 Japan Power RFO 135107.0034424741315942484525

36314012 Uch Power Gas 586551.25535524516490499505507525292


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49256241048813 Altern Energy Gas 3126.542625282627262629290-02014 Liberty Power Gas 235211.848-114188185185166165187185175186101153Sub. Total 5,7735,1723,2633,4293,6913,8853,5063,8413,0523,6102,8483,1223,4632,732

3,37015CHASNUPPINuclear 32530030028228927328820-23826330230129923816

CHASNUPPIINuclear 340300-134216233270227289275294206284


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30322717 Tavanir, Iran -3930323230323031313129282930Total 6,4385,8113,5943,8764,2274,4214,0964,1183,3724,1553,4353,6594,077

3,3633,866

The reasons assigned for power shortages are as under:-Requirements as per Serial Nos (ii) and (iii) of the of theDirections of Honable Supreme Court of Pakistan(ii) Total electricity generated for the last one year(Hydel, IPP, RPP, etc.) if shortage, assignedreasons.(iii) Detail of IPPs, which are generating and notgenerating electricity and the reasons for the sameOperational Constraints of the Power Generation &

Distribution System1. Diversion of gas, reduced power generation andincreased cost of generation whereas no tariffincrease allowed from FY 2003 to FY 2007, despitesteep increase in generation cost due to surge in oilprices.1. Overdue rehabilitation of distribution network andPublic Sector Generation Companies (most of theplants have been outlived) due to time and financialconstraints causing increase in distribution andgeneration losses.

2. Increased non payment of bills (collection issues,including extra ordinary stay by the courts) andKunda Culture3. Mismatch between cost of supply and tariff triggeredbirth of circular debt and adversely affected fuelsupplies to IPPs and GENCOs plants.4. IRSA releases water from dams exclusively as per


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cultivation requirement and not for powerrequirement.HRC 7734-G/09

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Other Reasons:

5. Public Sector was not allowed to add new capacity inthermal since long time resulting in no capacityadditions during 2003-20086. Quantum jump in power demand (7% to 14%) dueto:

Consumption led growth strategy of 2002-2008 influx of millions of household appliances.

Continuous increase in rural electrification since2002 onwards

Increased demand for agri-tubewell loads over80,000 new connections.7. Extra high Load growth in urban areas (20%)8. Air-conditioning load exceeds 5000 MW and is beingadded each year.Following reasons were given by the PEPCO/PITC for not updating thewebsite: -1. PITC has been updating the information on websiteon the basis of information provided by concerneddepartments.2. Last information regarding news & media was

provided to PITC on September 2010 and uploadedaccordingly.3. The information regarding power situation has beenprovided by PEPCO media cell to PITC on19/05/2011 which was instantly updated. Since thenPITC has not received any information.4. Information regarding power produced by IPPs &Rental power is being provided by WPPo & CPPA andupdated till June 2011 (Cumulative July 10-June 11).5. PITC will make all efforts to get the updated

information from concerned departments and uploadon regular basis.Besides the figures noted hereinabove, PEPCO provided followinginformation of power generation capability for Hydel plants, GENCOsIPPs, to the ADB: -PEPCO SUPP LY & D EMAND POSI T I ON : 2 0 0 8 - 2 0 1 2

U PDA TED I N MARCH 2 0 0 9 2 0 0 8 - 0 9 2 0 0 9 - 1 0

Description Mar Apr May Jun Jul Aug Sep Oct Nov Dec


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A.(i)(ii)(iii)CommittedGenerationCapability

HydelGENCOsIPPs32954314618138634512619747934660620450354689

66155657478866186026478872055979479275705036479677635545

48617750418349168402Total (A) 13790 14572 15657 16339 17063 18019 18341 17595 18156 17501B.C.Forced OutagesMaintenanceReserves889827913

5899313039601549721810071051029


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210104111781048336410942431

D. Firm 12074 13070 14423 15225 16073 16907 17102 15376 13744 13976HRC 7734-G/09

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GenerationCapability (AB-C)E. Peak Demand 14686 15899 17004 17824 17898 17936 18110 16453 14777 14931F. Surplus/DeficitGeneration(+/-)-2612 -2829 -2581 -2599 -1825 -1029 -1008 -1077 -1033 -955

The above chart with the updated information about the supply anddemand position from 2008 to 2012 reproduced hereinabove and

latest information supplied during the hearing of the case suggest anoticeable difference supplied by the PEPCO on different occasions.Thus, no other inference can be drawn except that correct facts arebeing concealed by the respondent PEPCO without any justifiablereason. However, it strengthens the viewpoint of petitioner MakhdoomSyed Faisal Saleh Hayat that RPPs have been introduced without anyfeasibility study and it has left a big question mark on thetransparency of the project.13. It is to be noted that updated data so far received fromtime to time, as is evident from the perusal of above documents,

makes it abundantly clear that no authentic and acceptableinformation is available, therefore, the argument so raised byMakhdoom Syed Faisal Saleh Hayat gets strengthened that withoutundertaking any feasibility study, RPPs were launched in a haste. Aperusal of ADB report establishes that ever since the presentGovernment came into power in the month of March, 2008, country isfacing shortfall of electricity because of increase in number ofconsumers of electricity day by day as the population is increasing, butinstead of pursuing long term projects like strengthening the alreadyexisting sources of electricity generation including hydel, thermalthrough GENCOs and IPPs through PEPCO, to meet the shortfall, the

idea of RPPs was resorted to. The statistics provided by PEPCO videletter dated 16.3.2012, reproduced hereinabove, also disclose theHRC 7734-G/09

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reasons on account of which IPPs are not generating/functioning totheir full capacity for the reasons noted hereinabove. Therefore, theGovernment instead of launching Rental Power Projects, could haveconveniently strengthened the IPPs, which are already working and the


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IPPs and hydel projects, which were likely to commence generation ofelectricity in the year 2009-2010 as per following details: -Project Name Capacity in MW CompletionDateAttock Gen Power Project 165 7th April, 2009

Zorlu Wind Power Project 50 19th April, 09Orient Power Project 225 May, 09(delayed)Atlas Power Project 225 June, 09(Delayed)Muridke (Sapphire)PowerProject225 July, 09(Delayed)Fauji Mari Power Project 202 August,09(Delayed)Nishat Power Project 200 Nov, 09

Engro Power Project 227 Dec, 09Total 1519

A cursory glance at the above comparative table shows that with theinterest and encouragement of PEPCO in the month of December,2009, 1519 MW was likely to be available. Statedly, a good number ofhydel plants are likely to generate electricity. It is not known as towhether any attention is paid by the PEPCO for the completion of thesame or not. Another important aspect, which can be gathered fromthe data/statistics provided subject to authenticity of the same, atpresent following RPPs are functioning:-Monthly Average Production of Each RPPSCP Requirement # (iv)KARKEY231.8MWCODGULF62MWCODNAUDEROI51 MWCOD

Reshma201 MWCODTechno EPower150 MWCODTotalProduction(MW)


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MONTHMW MW MW MW MWMar-11 0 61 0 0 0 61Apr-11 31 57 1 0 0 88May-11 41 61 1 0 0 103HRC 7734-G/09

[RPPs case] 18Jun-11 43 61 8 0 0 112Jul-11 54 60 30 0 0 143Aug-11 65 2 0 0 0 67Sep-11 43 56 20 0.43 0 119Oct-11 75 54 0 24 0 153Nov-11 81 58 12 63 0 215Dec-11 54 62 19 0 0 135Jan-12 61 54 19 0 0 134Feb-12 32 51 0 0 0 83

POLICY FOR RPPs14. We have inquired from the learned counsel of PEPCO,

GENCOs and WAPDA as well as worthy former Minister for Water &Power, Raja Parvez Ashraf as to whether any policy was formulatedwhile adopting the phenomenon of rental power plants to generateelectric power, they pointed out that the concept and the rationalebehind the scheme of introducing Rental Power Plants in the countrywas floated by the previous Government as a quick way to addressimpending power shortages. References have been made by them tothe Cabinet decision bearing No.ECC-135/9/2006 dated 16.08.2006.They also pointed out that the justification put forward by the thenGovernment in installing the plants was that the rental plants areexpensive, however, given the urgency to have additional powercapacity before next summer as per WAPDAs demand projections andthe long gestation period for new plants, renting of plant(s) appears tobe the only short term solution if shortfalls are to be met. And thesummary of ECC dated 12.08.2006 was submitted to the Cabinet forapproval, which reads as under:-6. Following policy guidelines are proposed forapproval:-(i) Allow renting of power plant/plants byWAPDA/NPGCL as an emergency measure, subject toHRC 7734-G/09

[RPPs case] 19

acceptance of tariff by NEPRA, and that WAPDAshould only rent as much power as is absolutelynecessary and which would be utilised with high loadfactor for economic utilisation of capacity;(ii) Approve proposal at para 5 for provision of gas torented plant/plants; and(iii) Nearest possible location to the load centres of


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Gujranwala, Faisalabad or Lahore to install the plant.However, if it is necessary to locate the plant atMultan then it should be ensured that there are notransmission bottlenecks.

8. Proposal at para 6 above be approved. Suggestion ofPlanning Division should also be taken into account byWAPDA/NPGCL.They were also of the opinion that under Rule 16(F) any casepertaining to the generation of electricity and laying of inter-provincialtransmission lines was to be placed before the Cabinet and no soonerit was approved, it would become the policy of the Government on aparticular subject, therefore, any decision taken in that behalf wouldbe deemed to be the policy. Learned counsel for WAPDA, PEPCO,GENCOs, etc., has already referred to certain decisions of ECC and theCabinet, which have been reproduced hereinabove, however, the ECCin its meeting dated 10.09.2008 directed that in case any of theapproved projects failed to achieve crucial milestones towards timelyproject implementation as per agreements, then the projects would beimmediately cancelled with penalties and that the deficit powergeneration capacity be expeditiously arranged through addition ofIPPs/RPPs, both solicited and unsolicited on fast track basis. Guidelinesby the ECC incorporated in this decision are reproduced herein below:-a. Proposals for rental power plants would be based on dualfuel (Gas and RFO)/single fuel RFO and would be

implemented in shortest possible time.b. Rental Power Plants would be arranged for a period of 3+1years.c. Efforts would be made that the tariff of rental power plantsis lower than the tariff allowed to IPPs based on similartechnology for their first ten years.HRC 7734-G/09

[RPPs case] 20

d. Mandatory storage of oil for rental power plants would befor ten days.e. PEPCO would revaluate the sites for the rental power

plants on the basis of space for oil storage, transportationof oil to the site, environmental aspects and powerevacuation etc.f. PEPCO would prepare a mid term revised forecast fordemand and supply of power and PPIB would providenecessary input/data to PEPCO in respect of prospectiveIPPs.


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g. Secretaries of Finance and Water & Power along withManaging Director, PPRA would review the mechanism ofprocurement to ensure that future delay is avoided andPublic Procurement Rules, 2004 are observed in letter andspirit.

Above guidelines by the ECC along with other decisions of the ECCreferred to hereinabove, if for the sake of arguments are considered tobe the policy of the Government, then emphasis should be that suchguidelines (policy) have to be implemented in letter & spirit. Exceptionto above guidelines is also possible to the extent of unsolicited RPPs,which cast duty upon the Secretaries of Finance and Water & Poweralong with Managing Director of PEPRA to review mechanism ofprocurement to ensure that future delay is avoided and PublicProcurement Rules, 2004 are observed in letter & spirit.POWERS OF JUDICIAL REVIEW TO INTERFERE IN THEGOVERNMENT POLICIES

15. It is to be clarified that the Government of the day underArticle 29 read with Article 2A of the Constitution is bound to formulatepolicies for the promotion of social and economic well being of thepeople, which includes provision of facilities to the citizens for workand adequate livelihood with a reasonable rest and leisure, etc.Energy/electricity is essentially one of the significant facilities requiredby the citizens for manifold purposes, namely, uplifting of their socialand economic status. Non-supply of electricity to the citizen regularly,is tantamount to depriving them of one of the essentials of the lifeincluding the security of economic activities, which are relatable to


their fundamental rights protected under Articles 9 and 14 of theConstitution. In the cases ofBank of Punjab v. Haris Steel Industries(PLD 2010 SC 1109), Liaqat Hussain v. The Federation of Pakistan(Constitution Petition No.50/2011), In Re: Human Rights Caseregarding fast food chain in F-9 Park(PLD 2010 SC 759), In Re: SMCNo.13/2009 (Case regarding Multi-Professional Housing Schemes)(PLD 2011 SC 619) and Shehla Zia v. WAPDA (PLD 1994 SC 693),Article 9 has been interpreted and its scope has been enlarged to eachand every aspect of human life. Therefore, whenever a policy is

framed with reference to uplifting the socio-economic conditions of thecitizens, object should be to ensure enforcement of their fundamentalrights.16. The Courts are not required to examine the policy as it hasbeen rightly urged by Raja Parvez Ashraf, former Minister of Water &Power during whose tenure, in the meeting held on 27.03.2008,decision was taken in the Cabinet for solicitation of Fast Track Power


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Generation Projects to overcome the gap of 2200 MW between theproduction and demand of electricity in the system till April, 2009.Reliance on the case ofBALCO Employees Union (Regd.) v. Union ofIndia (AIR 2002 SC 350) has rightly been placed by him. A 9-MemberBench of this Court had also decided in the case ofWatan Party v.

Federation of Pakistan (PLD 2006 SC 697) regarding power of Court toexamine the polices of Government. Relevant Paras therefrom arereproduced hereinbelow: -57. The next question is in respect of the judicial reviewof the policies of the Government. It is well settled thatnormally in exercise of the powers of judicial review thisCourt will not scrutinize the policy decisions or tosubstitute its own opinion in such matters as held inMessrs Elahi Cotton Mills ibid. Likewise in the case of BalcoEmployees ibid, the Supreme Court of India observed asfollows:--HRC 7734-G/09

[RPPs case] 22

"Process of disinvestments is a policy decisioninvolving complex economic factors. The Courts haveconsistently refrained from interfering with economicdecisions as it has been recognized that economicexpediencies lack adjudicative disposition and unlessthe economic decision, based on economicexpediencies, is demonstrated to be so violative ofconstitutional or legal limits on power or so

abhorrent to reason, the Courts would decline tointerfere. In matters relating to economic issues, theGovernment has while taking a decision, right to"trial and error" as long as both trial and error arebona fide and within limits of authority."This view is in line with this Court's view as given in ElahiCotton ibid. Similar view was taken by the Indian SupremeCourt in Delhi Science Forum v. Union of India (AIR 1996SC 1356).58. The parameters of judicial review were graphicallycommented upon in Associated Provincial Picture Houses

Ltd. ibid which has been relied upon by counsel for bothsides where in the concluding paragraph the Court came tothe conclusion in the words of Lord Somervell as under: -"I do not wish to repeat what I have said, but itmight be useful to summarize once again theprinciple; which seems to me to be that the court isentitled to investigate the action of the local


24/90

authority with a view to seeing whether it has takeninto account matters which it ought not to take intoaccount, or, conversely, has refused to take intoaccount or neglected to take into account matterswhich it ought to take into account. Once that

question is answered in favour of the local authority,it may still be possible to say that the local authority,nevertheless, have come to a conclusion sounreasonable that no reasonable authority couldever have come to it. In such a case, again, I thinkthe court can interfere. The power of the court tointerfere in each case is not that of an appellateauthority to override a decision of the local authority,but is that of a judicial authority which is concerned,and concerned only, to see whether the localauthority have contravened the law by acting inexcess of the powers which Parliament has confidedin it. "This view was further reiterated and the principle laid downtherein was followed in Nottinghamshire County Council v.Secretary of State for the Environment [(1986) 1 All ER199] wherein the Court observed as follows:"The law has developed beyond the limitsunderstood to apply to judicial review as practiced byHRC 7734-G/09

[RPPs case] 23

the courts in 1947. The ground on which the courtswill review the exercise of an administrativediscretion by a public officer is abuse of power.Power can be abused in a number of ways: bymistake of law in misconstruing the limits imposedby statute (or by common law in the case of acommon law power) on the scope of the power; byprocedural irregularity; by unreasonableness in theWednesbury sense; or by bad faith or an impropermotive in its exercise. A valuable, and alreadyclassical; but certainly not exhaustive analysis of

the grounds on which courts will embark on thejudicial review of an administrative power exercisedby a public officer is now to be found in LordDiplock's speech in Council of Civil Service Unions v.Minister for the Civil Service [1984] 3 All ER 935,[1985] AC 374."There is no cavil to the proposition being espoused by


25/90

learned Attorney General with reference to Peter Can's "AnIntroduction to Administrative Law" 2nd Edition that theCourt while exercising power of judicial review may notexpress opinions on polycentric issues requiring technicalexpertise and specialized knowledge. In the instant case,

however, we are seized not with a polycentric issue assuch but with the legality, reasonableness andtransparency of the process of privatization of the projectunder consideration i.e. PSMC. These are well establishedbasis for exercise of judicial review. Thus it is held that, inexercise of the power of judicial review, the courtsnormally will not interfere in pure policy matters (unlessthe policy itself is shown to be against Constitution and thelaw) nor impose its own opinion in the matter. However,action taken can always be examined on the wellestablished principles of judicial review.In the light of the above dictum, there could be no cavil with theproposition that as far as transparency in the implementation of thepolicy, if available, the process of awarding contract is concerned, itsquarely falls within the jurisdiction of this Court available to it underthe Constitution and the power of judicial review. Reference may bemade to the cases ofIqbal Haider v. Capital Development Authority(PLD 2006 SC 394), Pakistan Steels (PLD 2010 SC 759), HRC No.4688/06 (PLD 2001 SC 619), Ramana Dayaram Shetty v. InternationalAirport Authority of India [(1979) 3 SCC 489]; Tata Cellular v. Unionof India [(1994) 6 SCC 651] = (AIR 1996 SC 11); Raunaq


International Ltd. v. I.V.R. Construction Ltd. (AIR 2004 SC 4299) =[(1999) 1 SCC 492];Air India Ltd. v. Cochin International Airport Ltd.[(2000) 2 SCC 617]; Reliance Energy Ltd. v. Maharashtra State RoadDevelopment Corp. Ltd. [(2007) 8 SCC 1] and judgment dated24.08.2009 of the Andhra Pradesh High Court in Nokia SiemensNetworks Pvt. Ltd. v. Union of India.TRANSPARENCY OF CONTRACTS17. It is important to note that all the executive authorities arebound to enter into contracts for supplies at the least expense to the

public exchequer. Most significant consideration for every departmentof the Government must be the best economical mode of meeting thepublic needs. Agreements for pecuniary considerations are againstpublic policy, as such, are void. Reference in this behalf may be madeto the case ofTool Company v. Norris [69 U.S. (2 Wall.) 45 (1864)],wherein the Supreme Court of United States, as back as in 1864, hasheld that all contracts for supplies should be made with those, and


26/90

with those only, who will execute them most faithfully, and at the leastexpense to the government. Considerations as to the most efficientand economical mode of meeting the public wants should alonecontrol, in this respect, the action of every department of thegovernment. No other consideration can lawfully enter into the

transaction, so far as the government is concerned. Such is the rule ofpublic policy, and whatever tends to introduce any other elements intothe transaction is against public policy. That agreements, like the oneunder consideration, have this tendency is manifest. They tend tointroduce personal solicitation and personal influence as elements inthe procurement of contracts, and thus directly lead to inefficiency inthe public service and to unnecessary expenditures of the public funds.HRC 7734-G/09

[RPPs case] 25

it is sufficient to observe generally that all agreements forpecuniary considerations to control the business operations of the

government, or the regular administration of justice, or theappointments to public offices, or the ordinary course of legislation,are void as against public policy, without reference to the question,whether improper means are contemplated or used in their execution.The law looks to the general tendency of such agreements, and itcloses the door to temptation, by refusing them recognition in any ofthe courts of the country. Every action taken by the Government mustbe in public interest and its action would be liable to be invalidated onthe touchstone of reasonableness and public interest and if it fails tosatisfy either test, it would be unconstitutional and invalid. Reference

in this behalf may be made to the case ofR.D. Shetty v. InternationalAirport Authority of India (AIR 1979 SC 1628). Further, in the case ofNagar Nigam, Meerut v. Al Faheem Meat Exports (Pvt.) Ltd. [(2007) 1Supreme 704] it has been held as under:-The law is well-settled that contracts by the State, itscorporations, instrumentalities and agencies must benormally granted through public auction/public tender byinviting tenders from eligible persons and the notificationof the public-auction or inviting tenders should beadvertised in well known dailies having wide circulation inthe locality with all relevant details such as date, time and

place of auction, subject-matter of auction, technicalspecifications, estimated cost, earnest money Deposit, etc.The award of Government contracts through publicauction/public tender is to ensure transparency in thepublic procurement, to maximize economy and efficiencyin Government procurement, to promote healthycompetition among the tenderers, to provide for fair and


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equitable treatment of all tenderers, and to eliminateirregularities, interference and corrupt practices by theauthorities concerned. This is required by Article 14 of theConstitution. In our opinion this is an essentialrequirement in a democracy, where the people are

supreme, and all official acts must be actuated by thepublic interest, and should inspire public confidence.HRC 7734-G/09

[RPPs case] 26

In the case ofRamana Dayaram Shetty vs The International AirportAuthority of India (AIR 1979 SC 1628), the Court has held as under:- dealing with the public, whether by way of givingjobs or entering into contracts or issuing quotas or licencesor granting other forms of largess, the Government cannotact arbitrarily at its sweet will and, its action must bein conformity with standard or norms which is not

arbitrary, irrational or irrelevant. The power or discretionof the Government in the matter of grant of largessincluding award of jobs, contracts, quotas, licences etc.,must be confined and structured by rational, relevant andnon-discriminatory standard or norm and if theGovernment departs from standard or norm in anyparticular case or cases, the action of the Governmentwould be liable to be struck down, unless it can be shownby the Government that the departure was not arbitrary,but was based on some valid principle which in itself was

not irrational, unreasonable or discriminatory.In the case ofRam & Shyam Co. v. State of Haryana (AIR 1985 SC1147), the Indian Supreme Court has held as under:- disposal of public property partakes the character ofa trust in that in its disposal there should be nothing hankypanky and that it must be done at the best price so thatlarger revenue coming into the coffers of the Stateadministration would serve public purpose viz. the welfareState may be able to expand its beneficent activities bythe availability of larger funds. where disposal is foraugmentation of revenue and nothing else, the State is

under an obligation to secure the best market priceavailable in a market economy.In the case ofHaji T.M. Hasan vs. Kerala Financial Corpn. (AIR 1988SC 157), the Court observed that: -It is needless to state that the Government or publicauthorities should make all attempts to obtain the bestavailable price while disposing of public properties. They


28/90

should not generally enter into private arrangements forthe purpose.As it has been noted hereinabove that no feasibility study wasundertaken by the previous Government during whose periodunsolicited RPPs were awarded to Alstom at Bhikki and General Electric

Power at Sharaqpur, inasmuch as, no material/documents have beenproduced on record to show that both the Governments introduced theHRC 7734-G/09

[RPPs case] 27

phenomenon of RPPs after due diligence. From reply submitted onbehalf of GENCOs as well as the former Minister for Water & Power,impression is gathered that they have outrightly accepted the proposalof RPPs without examining its merits and de-merits. In this behalf thefirst special meeting of the Cabinet was held on 14.5.2008 wherein thedecision was taken for Fast Track Implementation of Power GenerationProjects to meet the demand and supply gap. As per the decision

contained in Package-B, Rental Power Plants of 200 to 300 MW wereapproved. On the basis of said decision, advertisements were madewherein bids were invited for setting RPPs, details whereof have beenmentioned hereinabove. Had there been due diligence beforeapproving above package, it would have seen the implication of thebillions of rupees by increasing down payment from 7% to 14%. Asper above advertisement, GENCO who had licence to generateelectricity and then to supply it to NTDC was not party in inviting bids.18. Internationally, the following factors have been consideredkey features in procurement of public contracts: -

(1) Upholding competition among firms;(2) Promoting best value for money;(3) Encouraging more firms to bid on work;(4) Maintaining openness and transparency in thebidding process;(5) Executing contracts quickly;(6) Ensuring quality of goods and services; and(7) Meeting other obligations required for federalprocurement.19. In this regard, it is to be noted that in section 5 of thePublic Procurement Regulatory Authority Ordinance, 2002, the

functions and the powers of the Authority have been defined,according to which the Authority may take such measures and exercisesuch powers as may be necessary for improving governance,management, transparency, accountability and quality of publicHRC 7734-G/09

[RPPs case] 28

procurement of goods, services and works in the public sector. Thewords transparency and accountability are of high importance and


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cast a duty upon the Authority who had invited the bids to ensureopenness of the transaction without withholding any information. Thecompetition to establish transparency between the interested parties isin fact the theme of the PEPRA Ordinance as well as the Rules framedthereunder (Public Procurement Rules, 2004). The bidders have to

compete with each other by filing their respective bids, therefore,while making procurement of an item like electricity through RPPs theAuthority is required to fix a reserved price while quoting lump sumRental Charges, Rental Rate and Reference Fuel Cost Components. Inabsence of such reserved prices, there would not be transparentcompetition and accountability of the bidders and procurers. In thecase ofMcManus v. Fortescue [(1907) 2 KB 1], it has been held byCourt of Appeal that in a sale by auction, subject to reserve price,every offer/bid and its acceptance is conditional; the public is informedby the fact, that the sale is subject to a reserve price; the auctioneerhas agreed to sell for the amount which the bidder is prepared to giveonly in case that amount is equal to or higher than the reserve price;the reserve price puts a limit on the authority of the auctioneer and hecannot accept a price below the upset/reserve price. In the instantcase, neither the reserved price has been mentioned in the publication,in pursuance whereof the bids were invited, nor such reserve price hasbeen disclosed in RFP. Inasmuch as, in advertisement made by PPIB,except mentioning Rental Power Projects of 200 MW cumulativecapacity near Karachi, neither the sites were indicated nor the type offuel or technology of plant was mentioned for this purpose. As far asunsolicited RPPS are concerned, there was no bidding process,


therefore, following chart has been prepared regarding solicitedRPPs:-A. ICB conducted by PPIBNam e o f RPP Si t e

s p e c i f i c a t i o n

Fu e l t y p e /

T e c h n o l o g y

M a k e &

t y p e o f

m a ch i n e r y R e s e r v e d

p r i c e

K a r k e y Not

providedNot specified Not

specifiedNot


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provided

Gu l f Re n t a l

Po w e r

Notprovided

Not specified Not

specifiedNotprovided

I n d e p e n d e n t

P o w e r ( P v t . )

L t d .

Notprovided

Not specified Notspecified

Not

providedS ia l k o t R e n t a l

Po w e r

Not

providedNot specified Not

specifiedNot

provided

R es h m a

Po w e r

NotprovidedNot specified Not

specified

Notprovided

P r e m i e r

En e r g y ( P v t . )

L t d .

Not

provided

Not specified Not

specifiedNot

provided

R u b a E n e r g y NotprovidedNot specified Not

specified

Not


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provided

Co n s o r t i u m o f

T a p a l

Notprovided

Not specified Not

specifiedNotprovided

Wa l t e r s

Po w e r

I n t e r n a t i o n a l

Notprovided

Not specified Notspecified

Not

providedB. ICB conducted by PEPCONam e o f RPP Si t e

s p e c i f i c a t i o n

Fu e l t y p e /

T e c h n o l o g y

M a k e &

t y p e o f

m a ch i n e

r y

R e s e r v e d

p r i c e Te c h o E.

Po w e r ,

S a m m u n d r i

R o a d ,

F a i s a l a b a d

Yes, but

changedlater on

Yes No Not provided

T e c h n o


L t d . S ah u w a l ,

S i a l k o t

Yes Yes No Not provided

Gu d d u Yes Yes No Not provided

Y o u n g Ge n Yes Yes No Not provided

The detail of RPPs regarding payment of advance, COD and presentstatus is given below: -N am e o f R PP A d v a n c e


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p a y m e n t

COD A d v a n c e

r e t u r n e d

o r n o t

P r e s e n t

s t a t u s o f RPPHRC 7734-G/09

[RPPs case] 30

I CB COND UCTED BY PP I B

K a r k e y Yes Not

achieved

within timeNo Functioning

Gu l f Re n t a l

Po w e r

Yes Notachieved

within timeNo Functioning

I n d e p e n d e n t

P o w e r ( P v t . )

L t d .

No Notachieved

within time---- No Machinery

at site

S ia l k o t R e n t a l Po w e r

No Not

achievedwithin time

---- Not

functioning

R es h m a

Po w e r

Yes Not

achieved

within timeYes Functioning

P r e m i e r


L t d .

No Notachieved

within time


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---- Not

functioning

RUBA En e r g y No Not

achievedwithin time

---- Not

functioning

Co n s o r t i u m o f

T a p a l

No Not

achievedwithin time

---- Notfunctioning

Wa l t e r s

Po w e r

I n t e r n a t i o n a l

No Notachievedwithin time

---- Not

functioning

I CB COND UCTED BY PEPCO

Te c h o E.

Po w e r ,

S a m m u n d r i

R o a d ,

F a i s a l a b a d

yes Notachieved

withintime/

PartialCOD

No Not

functioning

T e c h n o


L t d . S ah u w a l ,

S i a l k o t

yes Notachievedwithin time

yes Notfunctioning/

No Machinery

at site

Gu d d u yes Not


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achieved

within timeyes Not

functioning

Y o u n g Ge n yes Not

achieved

within timeyes Notfunctioning

UNSO LI CI T ED

Te c h o E.

Po w e r ,

S a m m u n d r i

R o a d ,

F a i s a l a b a d

( E x t e n s i o n )

No Not

achievedwithin time---- Not

functioning/No Machinery

at siteHRC 7734-G/09

[RPPs case] 31

K a r k e y

( E x t e n s i o n )

No Not

achievedwithin time

---- Notfunctioning/No Machinery

at site

N a u d e r o - I yes Notachievedwithin time

No Functioning

N a u d e r o - I I yes Notachieved

within timeyes Not

functioning

Ab b a s St e e l

G r o u p

No Notachievedwithin time


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---- Not

functioning/No Machinery

at site

Thus, it is held that quoting the reserve price, allocating the sites,

down payments, etc., were the crucial factors to ensure competitivebidding. Since, these were not mentioned in the advertisements, thebidding process were rendered questionable. Resultantly, all thetransactions lacked transparency.UNSOLICITED RENTAL POWER PROJECTS20. As per information provided by NEPRA, initially NTDC/CPPAapproached NEPRA for obtaining license to purchase power from RPPs.NEPRA allowed this power purchase arrangement to NTDC/CPPA videletter No. NEPRA/R/PAR-11/CPPA-2006/6213-15 dated 27.07.2006.Subsequently, NEPRA vide letter No.NEPRA/R/PAR-11/CPPA-2006/6920-22 dated 09.10.2006 decided to withdraw the power

acquisition permission granted to CPPA for procurement of power fromRPPs and advised NPGCL as under: -(i) NPGCL to file an application for modification in theirlicense under NEPRAs Application ModificationProcedure Regulations 1999.(ii) NPGCL to execute their PPA with CPPA in respect ofthe current power generation and also include theprovision of additional power from rented powerplant.(iii) NPGCL to file their tariff petition in respect of

additional generation.HRC 7734-G/09[RPPs case] 32

Based on above advice of NEPRA, NPGCL approached NEPRA formodification in generation license and signed RSCs, includingassignment, if any, with the RPPs.21. It has been admitted on behalf of PEPCO and GENCOs thatphenomenon of rental power projects to overcome the shortage ofelectric power was introduced by the Government for the first time inthe year 2006, considering it to be a short term measure. Twounsolicited rental contracts were executed with M/S Alstom for 136

MW at Bhikki and M/S General Electric Power for 150 MW atSaharanpur respectively. The contract of Bhikki was awarded toAlstom, and later on said company assigned it to M/S Pakistan PowerResources (PPR) in pursuance of agreement dated 17.01.2007. Detailsof the Bhikki project are as under: -BHIKKI POWER PROJECTPlace: Bhikki, District SheikhupuraCapacity: 136MW (gas based)


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Rental term: 36 monthsContract amount: USD 103,015,476Mobilization Advance: USD 7,211,083Agreement date: 18 September, 2006Rental revenue received: USD 68,024,477

Rental revenue loss: USD 34,990990Date of Assignment 17 January, 2007Effective Date 23 February 2007COD Scheduled 23 June 2007Achieved Unit III 19 December, 2007Unit II 22 January 2008[Unit I 02 April 2008]Expiry of Agreement: 22 June 201022. It is stated that the Bhikki and Sharaqpur RPPs wereapproved by the ECC on 16.08.2006, which perhaps is not correctstatement of fact because ECC examined the matter vide case No.ECC-135/9/2006 dated 16.08.2006 in respect of 150 MW power plant atPiranghaib, Multan on rental basis and decided as under: -Case No.ECC-135/9/2006Dated: 16.08.2006

150 MW POWER PLANT ATPIRANGHAIB MULTAN ON RENTALHRC 7734-G/09

[RPPs case] 33

BASISDECISIONThe Economic Coordination Committee (ECC) of the Cabinet

considered the summary dated 12thAugust 2006, submitted by theMinistry of Water and Power on 1 5 0 MW Po w e r P l an t a t P ir a n g h a i b M u l t a n o n R e n t a l B a s i s and approved the proposals at

para 6 and 8 of the Summary.

The above decision was considered and approved by the Cabinet on26.08.2006 and was conveyed by the Ministry of Water & Power,Government of Pakistan to Chairman WAPDA, Lahore vide letterNo.PL-9(3)/2006.23. It may be noted that NPGCL sought permission fromNEPRA to enter into rental arrangements for three years commencing

from 100 days of the signing of contract between the parties forenhancing installed generating capacity by 150 MW at Sharaqpur and136 MW at Bhikki and further specified the rates of sale of electricity.The NEPRA recorded its decision dated 15.12.2006 in CaseNo.NEPRA/TRF-63/NPGCL-2006/7951-53, which is reproducedhereinbelow in extenso: -Subject: Decision of the Authority w.r.t. Tariff Petitionfiled by Northern Power Generation Company


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Ltd. (NPGCL) for Determination of Tariff forPower Plants on Rental Basis from GEEnergy/Alstom Power (Case No.NEPRA/TRF-63/NPGCL-2006)- Intimation of Decision of Tariffpursuant to Section 31(4) of the Regulation of

Generation, Transmission and Distribution ofElectric Power Act (XL of 1997)Dear Sir,Please find enclosed the decision of the Authority (4pages) in Case No.NEPRA/TRF-63/NPGCL-2006.2. The determination is being intimated to the FederalGovernment for the purpose of notification of Generation,Transmission and Distribution of Electric Power Act (XL of1997) and Rule 16(11) of the National Electric PowerRegulatory Authority Tariff (Standards and Procedure)Rules, 1998.3. Please note that only Order of the Authority at para9 of the determination relating to the Reference Tariff andallowed adjustments & indexation needs to be notified inthe official gazette. The Order is reproduced for thepurpose of clarity and is attached herewith.HRC 7734-G/09

[RPPs case] 34

DA/AS above.Sd/- 15.12.2006(Mahjoob Ahmad Mirza)

Keeping in mind the fact that in respect of Rental Power Projects,subsequent to issuance of guidelines, the NEPRA was practically madeineffective to determine the electric charges as it was directed tofollow Paragraphs 1.9 and 1.10 of the Guidelines issued by the FederalGovernment in the year 2005 in respect of IPPs. As far as question ofdetermination of tariff is concerned, it was noted in a summary put upto the ECC on 07.02.2008 that efforts be made that the tariff of theRPPs is in line with the tariff determined in respect of the IPPs basedon similar technology for their first 10 years, but it appears that thetariff of the RPPs was much higher than that of the IPPs. The aforesaidParagraphs are reproduced hereinbelow: -

1.9 Tariff through competitive processThe bidding process may be structured on either ofthe following two options;a) bidding for a tariffb) Offering an up-front benchmark tariff andbidders to quote a discount on the benchmarkprice.


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1.10 It is proposed that once a tariff has been arrived atthrough competitive biddings based on either of theprocesses mentioned at Para 1.9 above, the biddingprocess be structured and administered by PPIB(Ministry of Water and Power) in consultation with

the power purchaser (WAPDA/NTDC), Ministry ofFinance and NEPRA. The bidding documents(including various formula, formats, etc.) along withevaluation criteria, be also finalized by PPIB inconsultation with the same agencies. The lowestevaluated levelized tariff would be recommended tothe GOP for acceptance.24. Despite restriction on determining the tariff by NEPRA, asit has been noted hereinabove, fuel cost charge of Rs.2.7194 per kWhdelivered at Inter connection Bas bar in respect of Sharaqpur as wellas Bhikki was determined. As per above calculation, the GovernmentHRC 7734-G/09

[RPPs case] 35

had already paid approximately US $ 2.161 million (Rs.18.63 billion)to these two RPPs as capacity and fuel charges. Thus, NPGCL (GENCOIII)suffered huge losses in the years 2007, 2008 and 2009, withregard to the RPPs in Block-I and Block-II, details whereof are givenhereinbelow: -Annex-3NORTHERN POWER GENERATION COMPANY LIMITED (GENCO-III)Financial Impact on Account of CCP Tariff Determined Vs CPP Tariff

DemandedCALCULAT I ON OF CAPACI TY

CHARGE

2 0 0 7 2 0 0 8 2 0 0 9

Dependable Capacity (MW) 261.46 261.46 261.46Capacity Purchase PriceEscalable Component:Fixed O&M Cost:____Mln. Rs.____Rent for Rented Block-I 2,272.40 2,272.40 2,272.40Rent for Rented Block-II 2,060.31 2,060.31 2,060.31

Guaranteed Heat Rate Bonus 261.54 261.54 261.54Gas Pipelines Installations 83.12 - -General Establishment Cost 3.50 3.68 3.86Administrative Cost 100.00 100.00 100.00M&I/Overhauls - - -MEPRA Fees 8.50 2.30 2.30Insurance - - -


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Depreciation (for ROA) - - -Duties etc. 442.00 - -Total Fixed O&M Cost 5,231.3670 4,700.2240 4,700.4078CPP-FOM charge (Rs./kW/Month) 1,667.3318 1,498.0469 1,498.1055CPP Determined By NEPRA

(Rs./kW/Month)1,283.4851 1,283.4851 1,283.4851CPP Tariff Difference(Rs./kW/Month)383.8467 214.5618 214.6204Projected Loss per Month due toless CPP Tariff Determined (MlnRs)100.3621 56.1002 56.1155Projected Loss per Year due toless CPP Tariff Determined (MlnRs)1,204.3452 673.2022 673.386025. It is also to be noted that as the natural gas was to beused for both these RPPs as the fuel and availability factors of both theplants were 92% and both the projects i.e. GE-Sharaqpur 150 MW andAlstom-Bhikki 136 MW, NPGCL generated (MKWH) 1515 and 816respectively on account of plant factor average 39% and 26%HRC 7734-G/09

[RPPs case] 36

comparing to availability factor 92%. Similarly, above facts and figures

show financial impact on account of CPP tariff determined by NEPRA(Rs./kW/Month) and CPP-FOM charge (Rs./kW/Month). The availabilityfactor efficiency is fully evident from the chart reproducedhereinabove. In a nutshell, due to tariff determination by the NEPRAaccording to the available formula, considerable losses occurred toNPGCL. Therefore, while going for further RPPs, the concernedauthorities ought to have taken into consideration that since these twoprojects had already caused losses to the public exchequer, therefore,it was not advisable to opt for generating electric power through RPPs.26. Raja Parvez Ashraf has placed on record a copy ofsummary of ECC dated 17.08.2009 wherein it is stated that the

Ministry of Water & Power received a few unsolicited proposals offeringa reasonable tariff, which were compatible with the average RPPstariffs received through ICBs and compliant with the ECC guidelines.The efficiency and available standards for these power plants and thefinancial models also matched the ICB projects. The detail of theunsolicited proposals, attached with the said summary, is givenhereinbelow: -


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Sr.No.Descriptionof project Fuel Capacity(MW)

RentalChargesdemandedby SponsorCents/kwhProposedRentalChargesCents/kwhRemarks1

Naudero-IGas504.464.462Naudero-IIGas514.464.00

Phase I financingarranged andproject alreadyinaugurated by thePresident.

Hard Area.Medium size plant.Overall Tarifflesser ascompared to RFOplants in the ICBmode.3 SammundriRoad

RFO 150 3.90 3.75Phase I beingcompleted onHRC 7734-G/09


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[RPPs case] 37

Extension 30.9.2009.

Proximately to loadcentre andeconomy of size.

4 Karkeyupgradation

RFO 222 5.98 5.60Higher Project costbeing power ship/barge mountedand differenttechnology.

Very relevant forKarachi

The Minister authorized the Secretary (Mr. Shahid Rafi) to submit the

summary, which sought approval of the ECC as under: -(i) Payment of 14% mobilization to IPP and GoPsovereign guarantee as proposed at para-4 ante (notrelevant as far as the case in hand is concerned).(ii) Installation of 473 MW of unsolicited projects asproposed at Para-5 ante.In respect of Naudero-II, noted hereinabove, a petition for tariffdetermination was filed by the CPGCL before NEPRA on 20.04.2010.The NEPRA considered that the petitioner was guilty of non-complianceof its directions, inasmuch as plant machinery was shifted from Guddu

to Naudero without prior approval of the Authority; the generationtariff of RPP at Guddu was determined on lower side, while higher tariffwas claimed on the same machinery to be installed at Naudero;advance payment had already been made against Guddu, which wasnot returned; and again advance payment of 14% was made on06.04.2010 against proposed new Naudero-II for the same machinery.Therefore, the petition was declined by NEPRA.27. Naudero-II was sponsored by Walters Power International,whereas Guddu Rental Power Project was sponsored by Pakistan PowerResources, which had not so far been signed off. During the hearing ofthe case, it was noticed that the total rental value in respect of Gudduplant was determined at US$ 72.48 million against which 14% downpayment equal to US$ 10.15 million, 7% on 17.03.2008 and 7% onHRC 7734-G/09

[RPPs case] 38

12.03.2009 had been made. But, when the plant was shifted fromGuddu to Naudero, again for the second time 14% advance paymentwas made on 06.04.2010 to M/S Walters Power International. Prima


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facie, it is a criminal act of extracting money from GENCOs on onepretext or the other, otherwise knowing well that Pakistan PowerResources had already obtained 14% advance payment, therefore, inall fairness, the GENCOs authorities ought to have pointed out in clearterms that as the said plant was not being installed at Guddu,

therefore, the advance payment of 14% ought to be returned. Be thatas it may, this Court, taking notice of this aspect of the matter, videorder dated 08.12.2010 directed as under: -In response to order of this Court dated 07.12.2010 finalstatements have been made on behalf of Pakistan Resources

(P.P.R.) and Walters Power International. The documents being

the negotiable instruments have been filed for effecting therecovery of the outstanding amount mentioned in the

statements. Learned counsel states that amount mentioned inthe above statement has been arranged and shall be returned to

Central Power General Company Ltd. During course of the day.

It is to be noted that according to learned counsel, the originalamounts have been paid by both the companies along with

markup upto date i.e. 08.12.2010.2. Mr. Abdul Malik Memon, C.E.O. of the GENCO is presentand he is required to conduct an inquiry/probe and submit a

report on the next date of hearing fixing responsibility upon the

officers/officials or the persons on whose instructions GENCOagreed to make the payment to both the companies without

keeping facts and circumstances of the case in front of them.

However, the requisite report after fixing responsibility upon theconcerned persons was not submitted.

28. As far as unsolicited RPP of Techno E. Power, SammundriRoad, Faisalabad is concerned, the same was allowed to continue inview of the recommendations made in ADBs report. As the machineryHRC 7734-G/09

[RPPs case] 39

of Karkay-II (extension) was not brought at site and when NEPRAproposed to take action because of non-achieving of COD, it wasinformed that basically this project of 222 MW was to be installed atKorangi, Karachi. Since the sponsor did not respond, therefore, neitherLOA was issued nor any RSC was signed. It may also be noted thatthere was yet another unsolicited RPP known as Abbas Steel Group

and as there was no machinery at site and as no response was givenby the sponsor to the GENCO, therefore, LOA was not issued. Theadvance payment in respect of Naudero-II sponsored by WaltersPower International had been recovered whereas no advance paymenthad been made to Karkey-II as well as Abbas Steel Group.29. As far as Naudero-I is concerned, it is sponsored by WalterPower International for a 5-year rental term, the location of the projectis in Sindh, its capacity is 51 MW, rental value has been determined at


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US$ 80.42 million and 14% advance payment equal to US$ 11.26million was made on 16.11.2009. This project could not achieve COD,therefore, GENCO (CPGCL) encashed the performance guarantee ofUS$ 255,000.30. Khawaja Muhammad Asif vehemently contended that the

unsolicited RPPs were awarded without adhering to the PPRA Rules.The In-charge Minister of WAPDA and the Secretary, who had agreedto accept the offer of the sponsors to allow them to generate electricitywithout following rules in the year 2006 and subsequent thereto hadacted without jurisdiction and illegally and caused loss to the publicexchequer. Since the object for which the RPPs were allowed to beinstalled was not achieved, therefore, not only the concernedauthorities who re-negotiated terms with them, but at the same timethe functionaries including the Ministers and others, who had allowedHRC 7734-G/09

[RPPs case] 40

advance payments ought to be dealt with in accordance with the lawand the amounts be recovered from them with mark-up.31. Raja Parvez Ashraf, former Minister and his counsel Mr.Wasim Sajjad, learned Sr. ASC admitted that during his tenure,Naudero-I was installed pursuant to an unsolicited proposal in view ofthe decision of ECC. He, however, explained that although procedureof ICB was not followed, but complete evaluation of the project and itstechnical and financial parameters on cost-plus basis were examined,inasmuch as the NEPRA had determined tariff under section 7 of theAct, 1997. Khawaja Ahmad Tariq Rahim, learned counsel supported

the contention raised by Mr. Wasim Sajjad, learned Sr. ASC on behalfof former Minister.32. Mr. Shahid Hamid contended that the Authority haddecided in the first week of September, 2010 to sign off Guddu PowerProject. In the meantime, machinery had been imported, therefore, onthe request of WPI and PPR, this machinery was shifted to Naudero forinstallation at WPIs Naudero-II with permission of CPGCL. The sponsorhad offered to determine some reasonable rental rate, but suchrequest was turned down unlawfully. The WPI in good faith made offerto install the machinery at Naudero-II within a period of six monthswithout receiving any payment till the COD was achieved. When the

review petition filed by GENCOs (CPGCL) was declined by NEPRA videorder dated 10.03.2011 on the ground that the machinery was morethan 10 years old, WPI offered to install absolutely new machinery atNaudero-II Project and also proposed revised amended contract withCPGCL with no advance till COD was achieved and installation of newmachinery, to be purchased by WPI from GEP in Austria. As far asacceptance of unsolicited proposal for Naudero-I is concerned, heHRC 7734-G/09


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contended that in view of the facts and circumstances, PEPRA Rule42(c) permits direct contracting without adhering to follow the rules ofICB, etc.33. Dr. Parvez Hassan, learned ASC appeared for Pakistan

Power Resources and argued that all the unsolicited proposals for RPPslike Bhikki, Sharaqpur and Naudero-I are covered under Rule 42(3),particularly, in view of the fact that NEPRA was authorized todetermine the rental value strictly in accordance with section 7, andfor such reason, no prejudice was likely to be caused to the generalpublic. Thus, legally it would be presumed that all unsolicited proposalswere transparent and in accordance with the Rules. Guddu PowerProject was awarded on the basis of ICB to the PPR. There werecertain defaults on the part of the CPGCL under the rental servicescontract, thus liability for achieving COD entirely lies on CPGCL/NEPRA.As gas to be used for the project was not available, therefore, it wasdecided that the project should be signed off. Although the advancepayment has been returned, but to settle other disputes, a mediatorhas been appointed. He categorically denied the allegations ofcorruption and undue influence in obtaining the unsolicited RPPs. Hestated that the allegations made in this behalf by Mr. Faisal SalehHayat and Khawaja Asif are false, frivolous, scandalous, vexatious andmala fide.34. We have considered the arguments put forward by thelearned counsel for the parties. As it has been pointed out time andagain, with a view to achieving the goal of transparency in awarding

contract or in making procurement, open competition is prerequisiteunder the PPRA Rules. The justification put forward by Mr. WasimSajjad, Sr. ASC in his arguments noted hereinabove is that as theHRC 7734-G/09

[RPPs case] 42

decisions have been taken by the ECC for awarding contract withoutfollowing the PPRA Rules, therefore, no mala fide or element ofcorruption can be attributed to the parties to the contracts or to theofficial functionaries. Suffice it to say, that since the ECC enjoysConstitutional status, one of its functions is to review from time totime the energy requirements, its effects and production and

investment. Essentially, ECC is bound to act in accordance with the lawof the land and the Rules. Thus, in presence of PEPRA Rules, it wasincumbent upon the Minister and the Secretary, Water and Power aswell as other functionaries not to have put up such a case before theECC in violation of the PEPRA rules. In the summary dated 17.3.2009,it has not been mentioned that without following PEPRA rules,unsolicited projects cannot be allowed. However, Mr. Shahid Hamid


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stated that such procurement is covered under Rule 42(c) of the PPRARules, which is reproduced hereinbelow:42. Alternative methods of procurements.- A procuringagency may utilize the following alternative methods ofprocurement of goods, services and works, namely:-

(c) direct contracting.- A procuring agency shall onlyengage in direct contracting if the following conditionsexist, namely:-(i) the procurement concerns the acquisition of spareparts or supplementary services from originalmanufacturer or supplier:Provided that the same are not available fromalternative sources;(ii) only one manufacturer or supplier exists for therequired procurement:Provided that the procuring agencies shall specify theappropriate fora, which may authorize procurementof proprietary object after due diligence; and(iii) where a change of supplier would oblige theprocuring agency to acquire material having differenttechnical specifications or characteristics and wouldHRC 7734-G/09

[RPPs case] 43

result in incompatibility or disproportionate technicaldifficulties in operation and maintenance:

Provided that the contract or contracts do not exceedthree years in duration;(iv) repeat orders not exceeding fifteen per cent of theoriginal procurement;(v) in case of an emergency:Provided that the procuring agencies shall specifyappropriate fora vested with necessary authority todeclare an emergency;(vi) when the price of goods, services or works is fixedby the government or any other authority, agency orbody duly authorized by the Government, on its

behalf, and(vii) for purchase of motor vehicle from local originalmanufacturers or their authorized agents atmanufacturers price.35. A perusal of the above rule suggests that the provision fordirect procurement without following procedure of fair competition wasnot applicable in the case of unsolicited proposal for RPPs. As far as


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the claim of learned counsel justifying the shifting of machinery fromGuddu to Naudero is concerned, no document/material has beenplaced on record to indicate that permission for the same was granted.Similarly, with regard to other unsolicited proposals for RPPs, nomaterial has been brought on record to canvass that there was no

mala fide. Therefore, having been left with no option except to believethe arguments raised by Makhdoom Syed Faisal Saleh Hayat andKhawaja Muhammad Asif that on account of such unsolicitedproposals, PEPCO and the concerned GENCOs had indulged incorruption.ROLE OF NEPRA36. The object and purpose of introducing NEPRA was toregulate the provision of electric power services and to determinetariff, rates, charges and other terms and conditions for supply ofHRC 7734-G/09

[RPPs case] 44

electric power services by the generation, transmission anddistribution as per section 7 of the Act, 1997, which has beenreproduced in the preceding paragraphs. However, neither the processwas undertaken with due diligence nor the policy already in voguesince 2006 onwards introduced by the previous Government forrunning power plants to cater the requirements of shortage ofelectricity was followed.37. It may be observed here that the NEPRA did not play itsdue role in the process of RPPs, firstly for the reason, that bids wereinvited on the basis of reference tariff of the fuel; secondly, the NEPRA

was directed to follow the guidelines already issued in respect of IPPs(guidelines 1.9 and 1.10), which have already been reproducedhereinabove, but in our opinion NEPRA being an independentregulatory body had to perform its functions according to law. As perprescribed procedure, NEPRA could not be oblivious of its duty ofdetermining tariff in accordance with the mandatory provisions of theAct, 1997. It may be noted that as per section 7(3)(a) of the Act,1997, NEPRA is exclusively responsible for determining tariff, rates,charges and other terms and conditions for supply of electric powerservices by the generation, transmission and distribution companiesand recommend to the Federal Government for notification. One of the

most important aspects of the case is that under section 7(6) of theAct, 1997, the NEPRA is mandated to protect the interests ofconsumers and companies providing electric power services inaccordance with the guidelines, not inconsistent with the provisions ofthe Act, laid down by the Federal Government. Therefore, the NEPRAcannot close its eyes and determine tariff contrary to the provisions ofthe Act, 1997. Not only that, under section 31 of the Act, 1997 andHRC 7734-G/09


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Rule 17(2) of the National Electric Power Regulatory Authority (TariffStandards and Procedure) Rules, 1998, the NEPRA is required to laydown procedures and standards for the purpose of determination oftariff. One of the objects thereof is that the Authority should allow

preference for competition rather than regulation and adopt policy fortariff determination in terms of rule 17(2) & (6) of the NEPRA Rules.The NEPRA has not adopted the aforesaid procedures and standards inthe matter of RPPs. In the circumstances, it can only be inferred thatthe NEPRA has been inoperative and inactive as far as RPPS areconcerned. When we inquired from the learned counsel as to why theNEPRA has not asserted its decision in discharge of function assignedto it, he had no satisfactory answer other than stating that in some ofthe cases including the unsolicited projects, the NEPRA has followedthe said procedures and standards in determining tariff. We are notsatisfied with the arguments so advanced by him because the datanoted hereinabove indicates that in the case of Naudero-I, which wasan unsolicited project, apparently rates of electricity were determinedon the higher side. However, it might not be possible for the NEPRA todischarge its functions because of the instructions and interference bythe Ministry of Water & Power, which had been issuing instructionsfrom time to time, but in any case, instead of following mandatoryprovisions of the Act, 1997, the NEPRA ought not to havecompromised its position.38. Mr. Kamal Anwar, ASC assisted the Court asAmicusCuriae. He submitted that advance payment was made to 9 RPPs,

namely, Karkey, Gulf Rental Power, Reshma Power, Techo SammundriRoad Faisalabad, Techno Sahuwal Sialkot, Guddu, Young Gen,Naudero-I and Naudero-II, details whereof have been givenHRC 7734-G/09

[RPPs case] 46

hereinabove. None of them could achieve COD within time, on accountof which their contracts were signed off. Statedly, the bank guaranteesfurnished on behalf of all the bidders have also been encashed. Out ofsaid RPPs, the advance payment was returned by Reshma, TechoSammundri Road Faisalabad, Techno Sahuwal Sialkot, Guddu, YoungGen and Naudero-II. However, Karkey (231.8 MW), Gulf (62 MW),

Naudero-I (51 MW) and Reshma (201 MW), which are still functioning,had achieved delayed COD. Mr. Muhammad Akram Sheikh, learnedcounsel for Karkey contended that Karkay is the only foreign companyof brotherly country Turkey, which had invested in this country, butwhen we inquired from him as to why favour was shown to the bidderby making 7% advance payment prior to the decision of the Cabinet,he had no answer.


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Similarly, learned counsel appearing for Karkey could notanswer regarding the non-achieving of COD in time. He stated that onaccount offorce majeure, barge-mounted ship could not reach Karachiwithin time. Without prejudice to the case so put up by the learnedcounsel, we may point out that we do have respect for the brotherly

country, but as far as commercial activities between any bidder andthe Government owned companies are concerned, the matter is to beexamined strictly in the light of the relevant provisions of theConstitution and the law. No plausible evidence has been brought onrecord to substantiate the plea. In addition to it, the case of Karkayalso suffers from the irregularities and illegalities, which have beennoted in respect of all other cases. We, therefore, hold that thecontract was awarded to Karkey in a non-transparent manner.39. In all, 19 Rental Power Projects, namely, Pakistan PowerResources, Guddu; Pakistan Power Resources, Piranghaib, Multan;HRC 7734-G/09

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Techno, Sammundri Road, Faisalabad; Techno Project, Sahuwal,Sialkot; Young Gen, Faisalabad; Gulf Rental Power, Gujranwala;Independent Power Limited; Kamoki Energy Limited; KarkeyKaradeniz, Karachi (Karakey-I); Premier Energy; Reshma PowerGeneration, Manga-Raiwind Road; Ruba Power Generation, Manga-Raiwind Road; Sialkot Rental Power, Eminabad; Walter PowerInternation

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